What is climate risk?

Climate risk indicates the factors associated with the potential consequences of climate change

According to the Intergovernmental Panel on Climate Change (IPCC), climate risk results from the interaction of hazard, exposure and vulnerability.

  • Hazard refers to the potential occurrence of physical impact from changes in long-term climate trends or extreme weather events. For instance, if a country is projected to experience an increased frequency of intense climate-related events, the level of hazard will increase.
  • Exposure indicates the presence of assets, services, resources and infrastructure that could be adversely affected. For instance, if a hydropower plant is located in a drought-prone area, it is considered to be more exposed to climate risk than a plant located in an area with sufficient rainfall.
  • Vulnerability is the propensity or predisposition to be adversely affected. It includes sensitivity, which refers to the extent to which a system is impacted by a sector or a source that could be negatively affected by climate hazards. The concept of vulnerability also takes into account adaptive capacity, which refers to the ability of a system to anticipate, prepare and plan effectively for climate change. If there is competition for water resources, hydropower systems might be more vulnerable to impacts. If a hydropower system is equipped with a robust data system and capable human resources to anticipate and adapt to climate change impacts, it might be less vulnerable.

Identifying climate risks in terms of these three concepts creates a framework to effectively describe the issues resulting from climate change. Governments and operators can address potentially hazardous events that could affect a power system, identify assets and resources exposed to the hazards and pinpoint adaptive capacity needs to reduce vulnerability to these impacts. Based on the assessment of climate-related risks, effective measures that enhance resilience to these risks can be identified to mitigate the potential impacts of climate change. 


Spatial variations in the trends of temperature and precipitation will pose different levels of risks to Latin American hydropower

Climate change in the trends of temperature and precipitation could increase the level of hazard for Latin America hydropower. Rising temperatures, fluctuating rainfall patterns, melting glaciers, and increasing occurrence of extreme weather events such as floods and droughts have major impacts on the streamflow and water availability, which will consequently affect hydropower generation.

Observations and projections show that climate hazards are expected to be unequally distributed across Latin America. For instance, some regions might be more affected by increased aridity at the end of the 21st century, while others might experience a significant increase in heavy precipitation. Spatial variations in temperature and precipitation trends will lead to differing climate hazards for hydropower generation in Latin America.

Although there is broad consensus that temperature will increase across Latin America, the magnitude of warming is likely to vary depending upon location. According to the IPCC Fifth Assessment Report, a temperature rise in Central America and Mexico, compared to the mean of 1986‑2005, could reach approximately 4.0 °C by the late 21st century under a high greenhouse gas (GHG) concentration scenario, while it may exceed 5.0 °C in inland South America.

Spatial variation is also observed in precipitation patterns. Some regional trends have been identified although in some cases the variance between the models of future precipitation patterns still exists due to underlying climate uncertainties and inconsistent observation trends in certain parts of Latin America.

Central America and Mexico, and a large part of Chile and Argentina (from the Central Andes and Patagonia) are projected to see a consistent reduction in precipitation and runoff over the coming century, which would consequently have negative implications to hydropower generation. Similarly, overall reductions to hydropower generation are also expected from Chile for the main hydropower generation river basins and from the Argentinean Limay River basin due to a decrease in precipitation and runoff.

Conversely, coastal regions of Andean countries, such as Peru, Ecuador and Colombia, are projected to have more rainfall. For example, in Colombia the annual average rainfall is projected to increase from 0.8% to 1.6% overall, although some areas of Colombia could suffer from decreasing precipitation. An increment in precipitation in the Paute River basin of Ecuador would lead to an increase in hydropower generation capacity.

In the rest of South America, climate models present marked disparity in climate and hydrological projections. For instance, future climate patterns in Brazil are still highly uncertain. An assessment of various climate models shows that climate change projections have a wide spread and data from several models provides a disparate rainfall variance ranging from between +40 mm to -38 mm across the country. For southeast Brazil, different models calculated a vague precipitation pattern between -30% to +30%. And for the Amazon in Brazil, the latest results from CMIP6 models anticipate less precipitation and decreasing runoffs under a high GHG concentration scenario (RCP 8.5), while previous CMIP5 models forecast a wetter climate. This spatial variation in precipitation patterns could add complexity to climate projections. A study compared four scenarios based on two General Circulation Models (Eta-HadGEM2-ES and Eta-MIROC5) and two GHG concentration scenarios (RCP 4.5 and 8.5) point to a reduction in rainfall volume and inflows in the north-central portion of Brazil and a slight increase in southern region of the country. 

More frequent extreme precipitation events may add risks to hydropower generation in Latin America

Climate projections show an increased probability of extreme precipitation events such as heavy rainfall, floods and droughts across the world, which will consequently increase risks to hydropower generation by altering water availability, increasing sediments, or making physical damages to assets. Some areas of Latin America are likely to experience more frequent extreme precipitation events, although there will be a significant spatial variation.

In many areas of Latin America, an increase in extreme precipitation events has been observed. According to the IPCC’s Fifth Assessment Report, Latin America has observed positive trends in the intensity of heavy rainfall in many areas, while some locations have seen negative trends. Historical records between 1961 and 2003 show that the maximum amount of 1-day-rainfall in Central America and northern South America significantly increased. In Colombia, the number of climate disasters and the intensity of extreme weather events have increased, with 90% of disasters associated with hydrometeorological phenomena in the last 50 years. In Peru, 72% of total national emergencies were related to hydrometeorological threats such as droughts, heavy rainfall and floods.

Climate models project that many parts of the region are likely to experience more extreme precipitation events, although their types and intensities may significantly vary between locations. By the end of 21st century, the number of heavy precipitation events are projected to increase in some places such as the Amazon, south-eastern South America and the west coast of South America, while a higher level of dryness is expected in other places, including Central America, Mexico, northeast Brazil and south-western South America. Some country case studies also forecast more frequent extreme precipitation events. Colombia is expected to experience more frequent extreme rainfall days by 26‑36% by 2050 compared to 1986‑2015, while Chile is projected to experience more extreme events by over 10 times in the next
30 years.

El Niño-Southern Oscillations (ENSO) could exacerbate these extreme precipitation events, although there are ongoing debates on how anthropogenic climate change and ENSO interact. ENSO is a large-scale natural fluctuation of ocean surface temperatures in the equatorial Pacific, coupled with changes in the overlying atmospheric circulation. The warm phase, which is known as El Niño, and the cold phase, La Niña, significantly affect temperature and precipitation in Latin America. The 2015‑16 El Niño phenomenon, one of the three strongest El Niño events since 1950, led to one of the worst droughts in Mexico and Central America, where precipitation and runoff were already declining due to climate change. At the same time, the El Niño phenomenon prompted widespread flooding in Peru and Ecuador, where climate change had created a wetter climate.

Since the effects of ENSO vary every year, it is often considered as one of the main causes of marked inconsistency in precipitation projections in South America. As modelling improves, biases in ENSO would be reduced while increasing the accuracy of future streamflow and hydropower generation projections.


A heavy reliance on hydropower in Latin America could raise a concern about its exposure to climate change

In Latin America, hydropower is the main source for electricity generation in most countries. Hydropower accounts for over 45% of total electricity generation of Latin America and generated 745 000 GWh in 2018. The total installed capacity in Latin America was 196 GW in 2019, of which 176 GW was from South America and the rest from Central America and Mexico. In countries such as Panama, Ecuador and Paraguay, hydropower’s share of electricity generation exceeds 70%.

The role of hydropower in Latin America is likely to remain significant or potentially increase. According to the IEA’s Renewables 2020, hydropower additions in Latin America are expected to be stable during the next five years (2021‑25) at 2 GW per year. More than half of the growth in 2021‑25 will result from large reservoir projects in Colombia and Argentina, with small‑scale hydropower projects in Brazil. The IEA’s World Energy Outlook projects that under a continuation of stated policies, the share of hydropower in the power sector would stay at the current level (Stated Policies Scenario) or increase to achieve sustainable energy objectives in full (Sustainable Development Scenario) by 2040.

Already in 2019 significant hydropower capacity was added in Latin America. South America saw the fastest hydropower growth rate and became the region with the second highest capacity added in the world. Brazil alone added 4 919 MW hydropower capacity, which was mainly attributed to the completion of the 11 233 MW Belo Monte hydropower plant. 

A strong reliance on hydro for electricity generation in Latin America often raises a concern about its exposure to the adverse impacts of climate change. Hydropower is expected to remain significant in mitigating climate change as the largest source of low-emissions electricity by 2030. However, the impacts of climate change could disturb the operation of hydropower by increasing variability in streamflow, shifting seasonal flows and augmenting evaporation losses from reservoirs. Given the presence of a large hydropower capacity in the region and its exposure to climate change, proper measures to enhance resilience to the adverse impacts of climate change are needed.


Ageing hydropower plants can be more vulnerable and require further efforts to reduce climate risks

Over 50% of the installed capacity in Latin America is over 30 years old. In Mexico, most hydropower plants are older than 50 years. Given the limited availability of capital and increasing environmental constraints for new hydropower projects across the region, an extended lifetime of existing hydropower plants is likely to become common practice in Latin America. For instance, the typical average technical lifetime of a hydropower facility in Peru is estimated to be between 81 and 104 years, which is longer than a usual lifespan of hydropower, 30 to 80 years. 

Ageing of hydropower assets in Latin America drives the trend to modernise the hydropower fleet. According to a recent study by the Inter-American Development Bank (IDB) and International Hydropower Association (IHA), 20 stations with an installed capacity of 15 GW out of 127 GW are older than 20 years in Latin America and the Caribbean and are in high, urgent need of modernisation.

Ageing hydropower plants need rehabilitation and upgrades to cope with the projected increase in the frequency of extreme precipitation events, in addition to their general rehabilitation needs. Larger flows of debris, suspended solids and sediments due to extreme precipitation events can accelerate equipment ageing. Hydropower plants that cannot withstand increasing extreme precipitation events could make the entire electricity system fragile, augmenting possibilities of disruptions in electricity supply. The modernisation of ageing hydropower facilities, such as upgrading spillway capacities, replacing equipment and increasing dam safety, will reduce their exposure to future climate hazards and help these facilities adapt to new climate conditions.

Modernisation and upgrades of Callahuanca hydropower plant

The 82 MW Callahuanca hydroelectric power plant in Peru was commissioned in 1938. When multiple landslides and flooding hit Callahuanca hydropower plant at the beginning of 2017, it was almost 80 years old. Landslides caused by torrential rains severely damaged 95% of the total infrastructure and equipment, including a severe impairment of the powerhouse and breakdown of protection systems. Callahuanca hydropower plant shut down causing blackouts in some areas of Peru.

The modernisation of Callahuanca hydropower consisted of rehabilitation and upgrading activities to address heavy rainfall and floods. It included reconditioning three generators and turbines and the installation of a new generator. A new automation and control system was installed. In addition, a new contention wall was constructed next to the river to protect the station from similar events. In 2019, Callahuanca hydropower plant restarted operations after two years of rehabilitation.1

Increasing competition over water use and deforestation makes Latin American hydropower more vulnerable to climate change

Increasing competition over water resources will likely increase the vulnerability of Latin American hydropower by making it more sensitive to water availability. By 2050, it is estimated that global water demand in terms of water withdrawals for energy generation, manufacturing and domestic use will increase up to 55% on average. In fact, when a drought hit southeast Brazil in 2014, the shortage of water created conflicts between different users. The drought affected hydropower generation, urban supply and wastewater treatment until it was finally settled by an agreement among sectors.

In addition, a rapid increase in deforestation in Latin America could augment hydropower’s vulnerability to climate change by lowering the level of adaptive capacity. Healthy forests anchor soil against erosion and prevent sediment from flowing into streams. The role of forests is particularly important for countries where a significant increase in precipitation is expected. For instance, the recent trends of deforestation for agriculture and urbanisation in Colombia, Peru and Ecuador could increase hydropower plants’ vulnerability to climate change, exacerbating soil erosion and runoff, and affecting sedimentation. According to the OLADE’s simulation in the pilot basins of these countries, adaptation measures such as reforestation and agroforestry can significantly reduce the volume of sediment in cases of extreme weather events while having a minimal or no impact on the volume of electricity generation. Overall, climate change could decrease dry season hydropower potential by 430‑312 GWh per month (‑7.4 to ‑5.4%), while the combined effects of deforestation could increase interannual variability from 548 to 713‑926 GWh per month (+50% to +69%). To avoid further deforestation, some Latin American countries including Mexico, Costa Rica, Ecuador, Brazil and Colombia have implemented Payment for Ecosystem Services (PES) programmes.

  1. Andritz Hydro GmbH, Bring Back to Life; CONELSUR (2018), Reconstrucción de la subestación Callahuanca 220/60 kV fortalecerá el sistema de transmisión eléctrico del país.